Yes you should if it is not the same characters that talk the you should
Stream of consciousness which came much later than the Romantic writers and artists.
The Second one has to be B. It cannot be the last 2. We as a species have failed to live up to the Romantic ideal. He is lecturing all people, not writing for them. He is disappointed in man's behavior.
I'm sorry I don't know the answer to the third one. My guess would be allusion. He is referring to Greek gods.
Answer:
1)”I’m a student” Tom said.
Tom said that he was a student.
2)”I’m living in London now” Charles said.
Charles said he was living in London then.
3)”You are my best friends” Jane said to us.
Jane told us we were her best friends.
4)”I don’t know what Fred is doing” Jonny said to me.
Jonny told me that he didn't know what Fred was doing.
Add some more commas and periods. This might fix some run-on sentences in there.